In any divorce there will be a myriad of matters that will need to be addressed. In many Kentucky divorces, the most intense piece is determining how the marital assets will be divided. This process can be particularly complex when a business is considered a marital asset. You need not directly be involved in the business to be eligible to receive a portion of its value when the marriage ends.
Exactly what will be done with the business depends upon a variety of factors. A business valuation will be necessary if a couple opts to either sell the business, or for one of them to be bought out. This can be approached in three main ways.
Common valuation approaches
The approach most commonly taken is income based. In addition to focusing on the income the business is bringing in, it also a looks to the amount of the business debt. As a part of this process it is possible the "Multiple of Discretionary Earnings" method could be applied. After estimating the expected discretionary earnings over the course of the next few years, based on how well the business performs, that number is multiplied by a number between 0 and 3-usually around 1.5. The resulting number is the value of tangible business assets the business will use in the future.
A second approach is asset based. Via this method, the fair market value of the assets the business holds is assessed. Accordingly, future revenue is not taken into consideration.
The third, and possibly most risky approach, is market based. Rather than assessing the actual value of the business, this process looks to comparable businesses that engage in similar work, that have recently been sold. While it is possible the business will be valued at more than it is worth, it is also possible it could be valued at less.
In a divorce involving a business that is considered marital property, its value and the way it is divided is extremely important. Accordingly, it is vital that the lawyer representing you is knowledgeable about the complexities of business valuation. Attorney Louis P. Winner understands the process and how important the outcome is for his clients. To learn more please see his website.